MARKET WRAPS
Stocks:
Most major European benchmarks were higher on Monday, but struggling for momentum, as traders positioned for another busy week of earnings.
In the U.K., the FTSE 100 underperformed, as investors looked ahead to a Bank of England decision when interest rates are expected to rise again. Retailers were among the biggest fallers on the blue-chip index.
Read BOE Decision Seen Finely Balanced Between 25Bps And 50Bps, Invesco Says
The latest Eurozone data revealed a mixed picture, with the economy returning to growth but core inflation remaining strong.
Read Eurozone Economy Picked Up Pace in 2Q
Read Eurozone Inflation Falls Again in July
Stocks to Watch
NatWest continues to be plagued by concerns about the peak level of net interest margins but this overlooks the longer-term support from its deposit hedge, Berenberg said. Read more .
Richemont's acquisition of a majority stake in Italian luxury shoemaker Gianvito Rossi doesn't have an impact in tackling the lack of scale the Swiss group suffers in soft luxury, Bernstein said. Read more .
Features that once made Volkswagen attractive are wearing thin while other manufacturers--from within the group and outside of it--are stepping into the roles, Stifel said. Read more.
U.S. Markets: Markets:
Earnings season continues, but Monday will be a quiet day for big-name results. Things will heat up on Tuesday with quarterly reports due from Caterpillar, Uber and Starbucks and others.
Around half of S&P 500-listed companies have reported so far. About 80% of companies have beaten Wall Street's earnings estimates.
Follow WSJ markets coverage here.
Forex:
The dollar's recovery is likely to extend into August, driven by a potential rise in inflation, Bannockburn Global Forex said.
The recovery is "encouraged by the risk of the first increase in the U.S. year-over-year headline CPI since June 2022, when it peaked slightly over 9%," it said.
The U.S. economy is looking resilient, and more so than in Europe, which strengthens the case for an interest-rate rise in September.
"We suspect the risk of a September Fed rate hike is greater than the market, which has less than a 20% chance discounted."
ING said the dollar is proving to be resilient, holding up despite Friday's softer employment cost index, which suggests that EUR/USD will be dragged back towards the 1.0920 area unless U.S. data are particularly weak.
Bonds:
The renewed widening of yield spreads between Treasurys and Bunds should prove to be a temporary phenomenon, LBBW said.
Based on money market forward rates, market players currently rate the probability of another European Central Bank interest-rate rise only moderately higher than the probability of a hike by the Federal Reserve after the summer.
Markets are pricing in about 20% probability of a Fed rate hike in September and 30% probability of a hike by the ECB, according to Refinitiv data.
Read Eurozone Gross Government Bond-Issuance Progress Is Ahead of 2022
Energy:
Oil prices edged lower but remained on course for their biggest monthly gain in more than a year, as OPEC+ supply cuts have tightened crude supplies.
"Evidence of cuts to exports from Russia and Saudi Arabia has boosted sentiment in the market," ANZ said, adding that Russian seaborne exports have dropped to their lowest level in seven months.
"This comes amid a broad pick-up in risk appetite across markets due to a combination of additional stimulus measures in China and robust economic data in the U.S."
Metals:
Base metals and gold prices were under pressure in London as a rising dollar helped to peg back the gains made last week, with signs of more bullish macroeconomic signals coming through.
"This is an important week for global manufacturing data and commodity company earnings ahead of Friday's U.S. nonfarm payrolls job report. Bond markets think that the Fed is done hiking in 2023-this week's data will shift the odds of additional hikes," Peak Trading Research said.
Read Time to Look at Steel, Not Iron Ore, Citi Says Time to Look at Steel, Not Iron Ore, Citi Says
DOW JONES NEWSPLUS
EMEA HEADLINES
Europe Returns to Timid Growth, but Bigger Headwinds Loom
Rising borrowing costs and stagnating Chinese demand for European goods could pave the way for another miserable economic winter for the eurozone this year.
These headwinds, which also include the continuing war in Ukraine and stubbornly high inflation, mean the region is likely to keep underperforming the U.S. for now, according to fresh data and recent sentiment surveys.
Heineken Cuts 2023 Guidance After APAC Region Weighed on 1H Earnings
Heineken on Monday cut its full-year outlook after reporting a fall in key earnings for the first half, largely due to lower volumes in the profitable Asia Pacific region.
The Dutch brewer now expects adjusted operating profit growth between zero and a mid-single digit this year. It previously guided for a mid- to high-single-digit rise.
Pearson 1H Pretax Profit, Sales Rose; Backs Full-Year Views
Pearson said Monday that first-half pretax profit and revenue rose after the education company made strategic and operational progress, and backed its full-year expectations.
The FTSE 100-listed company said pretax profit for the first six months of the year was 236 million pounds ($303.2 million) compared with a restated GBP185 million a year earlier.
Galp Confirms 2023 Guidance Despite Profit, Sales Drop in 1H
Galp on Monday reported lower net profit and sales for the first half, but backed its guidance for the year.
The Portuguese energy company said net profit in the first half fell to 603 million euros ($664.4 million) from EUR713 million in the first half of 2022. Galp reported sales of EUR10.02 billion compared with EUR12.70 billion a year ago.
BT Group Taps Telia CEO Allison Kirkby
BT Group said Monday that it has appointed Telia Co.'s Allison Kirkby as chief executive, succeeding Philip Jansen from the end of January.
The British telecommunications group said Kirkby has been president and CEO of Swedish telecommunications operator Telia since 2020, having also held leadership roles in Danish and Swedish telecommunications companies TDC and Tele2.
Troubles at Barclays Prompt a Shake-Up-and Banker Exits
Barclays executives embarked on a drastic overhaul of the British bank's Wall Street arm early this year. The goal: prove it can hang with the likes of JPMorgan Chase and Goldman Sachs.
They replaced key leaders and laid out a strategy to become a top five player in as many lines of business as it can, if not investment banking overall. So far, the changes have done little to lift its stock and led to an exodus of senior bankers-more than 30 of the investment bank's roughly 200 managing directors have left.
GLOBAL NEWS
China's Economy Stutters Forward as Growth Concerns Linger
HONG KONG-Growth momentum in China's economy showed continued signs of weakness in July, raising calls for Beijing to intervene more aggressively to prevent negative sentiment from taking root.
An official measure of Chinese manufacturing activity contracted for a fourth straight month in July, while a gauge of activity in the services sector-a key driver of growth after China lifted its Covid-containment measures in January-fell to its lowest level this year.
China State Planner Rolls Out Consumption Support as Recovery Slows
China's state planner on Monday released a notice outlining measures to expand the country's consumption, as the post-Covid recovery in the world's second largest economy runs out of steam.
The National Development and Reform Commission urged local governments to ease car purchase restrictions and roll out measures to stimulate new car purchases. It told local officials to promote the use of electric vehicles in the countryside and upgrade EV charging infrastructure, including the construction of battery replacement stations.
While Everyone Else Fights Inflation, China's Deflation Fears Deepen
Signs of deflation are becoming more prevalent across China, heaping extra pressure on Beijing to reignite growth or risk falling into an economic trap it could find hard to escape.
While the rest of the world tussles with inflation, China is at risk of experiencing a prolonged spell of falling prices that-if it takes root-could eat into corporate profits, sap consumer spending and push more people out of work. Its effects would ripple across the globe, easing prices for some products that countries like the U.S. buy from China, but would also deprive the world of important Chinese demand for raw materials and consumer goods, while also creating other problems.
How the U.S. Economy Is Sticking the Soft Landing
To see what an economic soft landing looks like, search no further than business hiring.
Parts of the economy are cooling, just as the Federal Reserve would like to see to combat inflation. Freight railroads, for instance, are seeing shipping volumes decline. Construction firms are cutting back on equipment purchases. A vending-machine company's customers are negotiating prices downward.
Why the Drivers of Lower Inflation Matter
Recent good news on inflation has ignited a debate over how much central banks' interest-rate increases are responsible.
The answer matters for where inflation and interest rates are headed. The Federal Reserve and the European Central Bank in the past week lifted their benchmark interest rates to 22-year highs and left the door open to additional increases.
Congress Faces Crunchtime in Fight Over Spending Cuts
WASHINGTON-One down, a lot to go.
House Speaker Kevin McCarthy (R., Calif.), who all year has tangled with his party's hard-line fiscal conservatives, heads into the August recess with the unfinished business of funding the government and only about a dozen legislative days when Congress returns in September.
(MORE TO FOLLOW) Dow Jones Newswires
07-31-23 0555ET
